The AMT must be destroyed
By Rod D. Martin
web posted December 12, 2005
"Carthage must be destroyed." -- Cato
Thus did Cato, the great Roman senator and orator, conclude
each and every speech of his career before the Senate.
Archeologists understand his wrath. As they've confirmed,
Carthage was a city that sacrificed its children to terrible gods,
an empire whose very existence threatened to engulf Rome's.
Today, our country faces a monstrous tax that is not-so-slowly
devouring not just our children, but us first, if we don't stop it
now. Fortunately, we have two possible Catos -- Mike Crapo
(R-Idaho) and Max Baucus (D-Mont.) -- in our Senate's well
who are calling for its demise.
Their bill would do what President Bush's tax reform panel and
so many others have recommended -- wipe the abominable
Alternative Minimum Tax (AMT) off the books.
The AMT was invented in 1969 as a trap for just a few thousand
wealthy people who, in certain leftists' opinions, "weren't paying
their fair share." It forces income earners to re-compute their tax
deductions if the IRS decides they are "too numerous."
You read that correctly.
If you've taken your deductions fairly and squarely and
Washington dislikes the result, then guess what? The IRS gets a
second bite at your money. Unfair? You bet. It's possibly the
most unjust tax in America. But it gets worse.
Not only is the AMT inherently unfair for everyone, it's a
uniquely looming threat for middle class breadwinners and their
families. Since it was never indexed for inflation, and because
deductions have risen over time, the number of middle-class
Americans who will be subjected to it -- people who were never
supposed to face it at all -- will skyrocket over the next few
years.
So a tax originally meant to "catch" 155 members of the "super-
rich" has morphed over time into a truly rapacious monster. By
2003, millions were forced to pay, purely due to inflation. And
while in that year 56% of AMT taxpayers had income exceeding
$200,000, that burden is shifting fast. By 2010, only 10% of
Americans paying the AMT will be making over $200,000,
while fully 53% will have income below $100,000.
In other words, the AMT's impact is shifting inexorably away
from the rich to the middle class. And the percentage of federal
revenues coming from AMT -- projected to hit a whopping 60%
by 2011 -- is becoming so great that if something isn't done now,
it will become very hard indeed to do it later.
As this tax begins to wash over the middle class like a tsunami, it
will destroy incentives to work, save, and invest.
And then there's the AMT's legendary complexity. According to
Senator Crapo, the IRS admits it takes 63 hours on average to
calculate one person's AMT liability. Sixty-three hours! And an
army of accountants for you to pay too, while they figure your
radically higher new tax bill.
It's not just individuals who get hit either: small businesses are in
the cross-hairs too. Depreciation of capital equipment tends to
trigger AMT liability, which means our capital-intensive industries
get hit hardest.
From farms to factories, thanks to the AMT, such firms labor
under the worst capital-cost-recovery system in the developed
world, costing countless jobs and driving employers overseas.
Cato would say it best: the AMT must be destroyed.
But in response, the AMT "empire" is striking back.
The forces of reaction -- perhaps best exemplified by the
Washington Post -- are screaming that abolition will "cost"
hundreds of billions in lost revenue, as if it is a gift from a
benevolent parent to children.
Aside from its inherent paternalistic, statist arrogance, there
remain two huge problems with this argument. First, the Post's
writers fret about the deficit, yet utter not a word for cutting
spending. Surprise, surprise.
And second, they completely ignore that removing this ugly
albatross from the neck of American productivity will generate
more, not less, revenue, as work, savings, and investment are
unleashed.
For years, my Vanguard PAC has been an organizational
member of Congress's "Abolish the Alternative Minimum Tax"
Caucus. Our board member Grover Norquist, President of
Americans for Tax Reform, has fought long and hard for this
reform. And last week's House vote, indexing the AMT to
inflation, was a great leap in the right direction.
But we need more. We need Congress to listen to Senators
Baucus and Crapo -- and to the American people -- and end
this stalking threat once and for all. Make no mistake: We must
act fast to abolish the AMT for the sake of our economy, our
jobs, our productivity, and the next generation.
Clearly, the AMT must be destroyed.
Now.
Rod D. Martin is Founder and Chairman of Vanguard PAC <
http://www.theVanguard.org>. A former policy director to
Arkansas Gov. Mike Huckabee and Special Counsel to
PayPal.com Founder Peter Thiel, he is a member of the Board
of Governors of the Council for National Policy, Executive Vice
President of the National Federation of Republican Assemblies
(NFRA), and editor and co-author of Thank You, President
Bush, the definitive handbook to the second term. Copyright (c)
2005 Rod D. Martin
Enter Stage Right -- http://www.enterstageright.com